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Federal Tax Brackets 2009

Published 4/22/09 (Modified 6/17/11)
By MoneyBlueBook

Update: Projected Have Been Released!

The following represents the Internal Revenue Service (IRS)'s officially released 2009 federal income tax brackets. Read 'em and weep - or perhaps rejoice, depending on where you stand on the whole federal income tax bracket sliding scale. Regardless, you're going to be getting close and personal with the marginal rates when you file your 2009 tax return in early 2010. Let's have a look at some of the tax changes shall we?

Official IRS Tax Rate Schedule Updates For Tax Year 2009

Via the Wall Street Journal, the following graphical table below gives you the official marginal tax brackets for married couples filing jointly as well as the marginal rates for single filers for 2009. The previous year's numbers are also provided to give you an idea of some of the more noticeable changes since 2008. The income numbers listed in the chart below are taxable incomes, and thus they have taken into consideration all available personal exemptions as well as any of either the standard or itemized deductions, including all pre-tax above the line 401k and deductible IRA contributions.

As key portions of the marginal tax tables are pegged to inflation, quite a few numbers must be annually revised. Thus you will note that there are quite a few key changes for the 2009 tax year compared to the year prior. However, while overall tax numbers appear to have nominally increased on the whole, taking into consideration the effects of inflation, effective tax rates may actually have remained level or even dipped a bit.

Despite the text below that says "projected", the official IRS numbers have been released and they now represent official federal income tax rate brackets, locked in for 2009.

To summarize, here is a run through of some of the more notable tax rate changes for 2009 and even a quick blurb about some of the key tax benefits that did not change based on official IRS releases thus far:

Personal Exemption and Exemption For Dependents - Increased to $3,650 from $3,500 (up $150) from 2008, but is phased out at higher income levels.

Standard Deduction - The great majority of American taxpayers take the standard deduction rather than itemizing deductions for expenditures such as mortgage interest, charitable contributions, and state & local taxes. The standard deduction increased to $11,400 from $10,900 (up $500) for married couples filing a joint tax return, increased to $5,700 from $5,450 (up $250) for singles and married individuals filing separately, and increased to $8,350 from $8,000 (up $350) for heads of household.

Overall Tax Bracket Thresholds - Increased across the board for all tax filing statuses. This means that if your annual income did not increase since last year or if you did not receive an inflation based pay raise, you may likely pay a little less in taxes in 2009 than in 2008. As the IRS notes as an example on one of its press releases, in regards to a married couple filing a joint return, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $67,900, up from $65,100 compared to tax year 2008.

Earned Income Tax Credit - Increased to $5,028 from $4,824 (up $204) for low and moderate income workers and working families with two or more children. The income qualification limit to take the earned income tax credit (EITC) for joint return filers with two or more children also increased to $43,415 from $41,646 (up $1,769).

Annual Gift Tax Exclusion Amount - Increased to $13,000 from $12,000 in 2008 (up $1,000). Often overlooked by people, the gift tax requires the gift giver to pay a special tax on the gift amount if it exceeds a certain amount per year. For 2009, that threshold will be bumped to $13,000.

Social Security Contribution and Wage Benefit Base - Increased to $106,800 from $102,000 (up $4,800). This means that 2009 income sources over $106,8000 will not be subject to Social Security taxation. With the Social Security tax rate at 6.20%, this also means that the maximum a person will shoulder in Social Security taxes for 2009 is $6,622.

Traditional and Roth IRA Contribution Limits - No change from 2008. Despite inflationary pressures that increased tax bracket rates across the boards, sadly, IRA and Roth IRA contribution limits will be staying the same - stuck at a crappy and paltry $5,000 per year for those under age 50, and $6,000 per year for those 50 or above.

While official IRS federal income tax brackets are not usually released for the following tax year until the late fall, it's frankly never too soon to get your hands on the earliest reliable marginal tax bracket predictions. Year after year, a group of private tax experts and economists associated with the Wall Street Journal get together and crunch officially released inflationary data to provide news readers an early bird peak at the following year's projected income tax brackets. This group, comprised of members from the Tax and Accounting arm of Thomson Reuters, tax analysts from CCH, and an accounting professor from Northern Illinois University - usually releases their annual tax bracket projections and estimations on tax deduction numbers for the following year during early fall (around September), well before the official IRS numbers are issued.

As marginal tax brackets track changes in inflation and other economic data fairly closely, the annual tax rate estimations by the Wall Street tax team members have yielded pretty reliable and on par results over the years. If you're antsy to get a head start on tax year 2010, stayed tuned in very early Fall 2009 for the newest updates on the 2010 projected federal income tax brackets.

Because of the election of Barack Obama as the new President of the United States and the handover of the country to a new political party, there are bound to be substantial changes in the tax code and income tax rates in the coming years. Working on an economic stimulus plan and advocating aggressive social agendas, President Obama has already proposed numerous changes to the ordinary income tax rates, such as raising the top rate from 35% to 39.6% - potentially boosting the tax burdens of higher income earners to new heights. He has also suggested the need to reduce tax deductions for American households earning more than $250,000 annually, and has also made proposals to increase taxes on capital gains and stock dividends. With a political and taxation platform that is decidedly against those those in the higher upper echelons of the U.S. tax code, those who have done well for themselves over the years seemingly have a lot to fear in Mr. Obama. Personally, while I feel Obama is doing a commendable job on the social and foreign policy front, I hope he doesn't get too carried away with his taxation ambitions. His remarks on taxes always make me nervous.

In the mean time, many of us regular taxpayers can only just ride along and hope for the best. Regardless of what Obama ultimately decides to do and no matter how federal income tax brackets eventually look like in 2010 and 2011, we should try to wisely structure our actions today to reduce our future tax burdens as much as possible, regardless of what happens. Such smart tax moves would include taking advantage of employer sponsored pre-tax perks like flexible spending accounts (FSA), and investing���� in tax deferred retirement vehicles like 401(k)'s and Roth IRA accounts.

This entry was posted on 4/22/09 (Modified on 6/17/11)
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I'm a tax dummy still trying to understand the brackets, and maybe somebody here can help.
My adjusted Gross Income for 2009 is going to be about $70,000 (couple filing jointly). As I understand it, that would put me in the 25% tax bracket (I think the cutoff is $67,900). Does that mean I pay 25% of $70,000 (which computes to $17,500) or does it mean I'll pay 15% on the first 67,900 and then 25% on the next $2,100? (which computes to $3395 + 525 = 3,920)?

Kevin says:November 10, 2009 at 2:38 pm

Albert,

The latter scenario is correct, i.e. 15% on first segment of income. That's why maximizing your deductions is so important because it reduces the amount that's taxed at the highest marginal rate. Tax credits, if they are available, are even better as they are a direct reduction of tax on a one for one basis.

phil pauley says:November 11, 2009 at 4:00 am

ALBERT: I AM GLAD THAT THE FORUM IS BACK TO THE SUBJECT OF TAX BRACKETS/WE ALL HAVE A LOT TO LEARN!!! YOUR ASSUMPTION THAT THE FIRST $67,900 IS TAXED AT 15% IS NOT CORRECT SINCE THE FIRST $16,700 IS TAXED AT 10% WHICH EQUALS $1,670 AND THE REST ($67,900-16,700=51,200) AT 15%,WHICH EQUALS 7,680, FOR A TOTAL OF $9,350.THE TOTAL TAX ON $70,000 IS THEN $9,350 PLUS YOUR CORRECT 25% TAX OF $525, WHICH RESULTS IN A TAX OF $9,875 !!! THE EFFECTIVE TAX RATE IS ONLY 14.1% / NOT THE 25% "MARGINAL" RATE!!! (YOUR ARITHMETIC IS WAY OFF AS YOU MAY KNOW/ IT LOOKS LIKE YOU MULTIPLIED $67,900 BY 5% INSTEAD OF 15%...)

Kevin says:November 11, 2009 at 9:28 am

Albert,

Sorry, didn't check your numbers, as I was just commenting on methodology.

Paul says:November 14, 2009 at 2:00 am

Here is what I hate and disagree with about taxes. For one, I am put in a higher tax bracket because of my income, just because I make a little more. That is not the kicker, not only do I pay more taxes, but a lot of that money is going to people for welfare and food stamps. I do not mind it at all to people that deserve it because they are in need, such as single parents, people that are disable, etc. However, some of that money also goes to indiviuals who do not deserve it, such as people who have been out of prison buying drugs and people who do not want to work. So, I get hammered for the money that I have earned to give out to those people who do not deserve it?! I mean think about it, look at your local grocery store at some of the people that are on foodstamps, do you think they really deserve it? Maybe they should stop having 18 kids and get a job. I also think that if your are on welfare or foodstamps, you should be required by law to take regular drug tests and job tests.

Terrel says:November 23, 2009 at 3:56 pm

A minute's success pays the failure of years.

GK says:November 23, 2009 at 5:22 pm

Wow.....is Steve a Liberal Talking Head...appointed to host this forum and keep us all brainwashed into believing this is all Bush's fault? Please, bring something new to the table....like some straight facts about how the deficit has grown since Obama taken office...and how much more it will grow with "Health Care Reform".

Steve says:November 23, 2009 at 5:45 pm

GK:

Of course it's grown since Obama has taken office. What's your point? Most of the spending was already in place from prior budgets and actions taken to stem financial crisis. TARP was instituted well before the November elections. The primary thing that was not already in place when Obama took office was the stimulus package.

Where did I say anything remotely about everything being Bush's fault, anyway? I believe I referenced the fact the Republicans were in complete control of both houses of Congress AS WELL AS the White House during the periond of time the national debt increased from around $4-trillion to around $11-trillion, thereabouts. Plenty of culpability to spread around. But those numbers are undeniable and they represent RECORD growth in the national debt.

So, GK...."Wow"...are you the Limbaugh/Beck dittohead rightwinger self-appointed to rewrite history for us?

How does it feel to be labeled, GK?

For the record, I am a member of the Concord Coaltion. If you knew anything about them at all, you would know the single issue they focus on is trying to restore control over spending and growth in the annual deficits and especially in the national debt, in generationally fair ways.

So please do not use your own slanted viewpoints to try and paint me as something I am not.

K~ says:November 27, 2009 at 1:48 am

I have been unemployed since Nov 2008, but that's not what scaring me the most.

When January 1 comes around, I will owe income tax on my 2009 unemployment income. I don't have it. Paying "income tax" on unemployment "benefits" was one of Ronald Reagan's pet projects. The concept wasn't logical then, and it isn't logical now. It was only another way to shift the tax burden away from the wealthy to those with the least power. Until now, we haven't had an opportunity to see what it means to our population on a large scale. People will go hungry, will be cold, will loose their homes and suffer ruined credit because of their 2009 IRS bill. Having "universal health care" which is such a misnomer - it's just another tax bill with or without the public option, will be a joke.

This is an economic tsunami on our horizon that's going to impact everyone, whether they are employed or not.

Summer Dennis says:November 29, 2009 at 3:21 pm

It is interesting how right-wingers are so quick to jump on Obama to blame him for paying their individual income taxes on stimulus and everything else while they never said a word when Bush and Cheney went on spending Billions and Billions of dollars in Afghanistan and Iraq, then Billions more building Infrastructure in Iraq, which would be bombed the following day!!! And do NOT forget that it was Bush who authorized Billions of Dollars to BAIL OUT AIG and bunch of other greedy companies that drained themselves down. It was Bush who approved another multi-billion stimulus package that sent out Useless checks to families who just spent it right away shopping. You guys are whining and complaining about Health Care reforms, but the war in Iraq and Afghanistan cost us way more than the Health care system would ever cost!!! All that money went down the drain and where is your patriotic "Win the war in Afghanistan" chanting when now most right-wing republicans are criticizing Obama for increasing the troops in Afghanistan when so many of our soldiers are getting killed left and right. I can bet you if Obama said he was pulling the troops out, the republican would have chanted that he's weak and not finishing the war the Bush administration started, etc.!! Neither Obama nor Bush had much to do w/ writing the Tax Code, so please research your subject before you make fool of yourself and post something like this.

Dee says:December 6, 2009 at 7:14 pm

It is interesting that Republicans have such a short term memory. It seams to be true
that if the Republicans are against it, it must be good for America. So we are on the right path, just give it some time. This was a MESS a year ago, and it has improved.

Steve D says:December 11, 2009 at 3:06 pm

This issue about taxes is very interesting. I am a fiscal conservative and a social moderate. Government under both the last administrations has exploded to such large proportions that we may not be able to recover. The left is always concerned that the rich are not paying their fair share; however, as previously mentioned, the upper 5% pay somewhere in the neighborhood of 80% of the taxes. The left vilifies the rich and makes anyone who produces to seem evil and greedy and earning their ill-gotten riches on the backs of the poor. This is easy to sell to the masses as they are generally not rich and see no impact on raising taxes on the producers.

The right is no better. They claim to believe in a smaller role for government yet vote in more spending and add to the overall burden of BIG government. Rich fat cats who take 8 and 9 digit salaries becuase they claim that they deserve it because "they" earn so much for their companies are simply overstating the direct impact "they" have and are actually rewarding themselves for taking uncalled for risks and getting it right some of the time. Even worse is the fact that they expect the same ridiculous pay when they don't hit their performance numbers.

It's all very frustrating. Government should not be the solution for everything. It should be forced to live on a percentage of the GDP. A portion of the total take should go into fund that would help us through periods of cyclical downturns and the rest should be used to run the government functions. All programs should be forced to live within that "budget" and if new government "mandates" are called for then antiquated government "mandates" should be dropped or revamped.

I wish we had a tax program that was simple and easy to understand and that could not be changed without a constitutional ammendment. Don't hold me to these percentages and brackets but something as follows would be a much cleaner system:

0% wages & bonuses tax on 1st $50,000
10% on wages & bonuses from $50,001 up to $125,000
25% on wages & bonuses from $125,001 up to $500,000
35% on wages & bonuses from $500,001 up to $2,000,000
50% on wages & bonuses from $2,000,001 to $5,000,000
80% on wages & bonuses in excess of $5,000,000

Non wage and Business income taxed in a similar table
0% 1st $50,000,
10% on next $500,000
20% on next $10,000,000
25% on all above $10,000,000

NO tax deductions except for charitable giving

Politics will should remain a part of how we spend the people's money. But how much we take as a percentage of GDP should be taken out of the ploitical spectrum.

Rick B says:December 12, 2009 at 3:14 pm

Steve D, you make many good points and I have enjoyed reading your many posts. I'd like to add a few things I've come to believe about our "system" and our world in general. I'm 62 years old and have seen a lot in my time on this planet.

1. Capitalism 'without parameters' is a ruthless monster that has the potential to destroy our country.

2. Creating a country with a vastly shrunken middle class is dangerous as it will lead to either revolution or a police state.

3. There should be term limits for all government positions and there should be no allowance of lobbyist money. Those running for office should be required to debate the issues.

4. Our tax system needs to be changed to be more progressive with no deductions, or, as you pointed out, maybe just for charities. However, charities wouldn't even be needed in a just society. Our system would care sufficiently for the TRULY needy.

5. Americans need to be more cognizant of what it takes to fund a modern country. We all want better roads, better schools, better health care, etc. but we don't to pay the taxes to fund them.

If Washington, Jefferson, Madison, etc. were to view our country today they would be in shock. We have become a consumption driven monolithic society. Does anyone in their right mind think the earth can continue to sustain this type of lifestyle? What happens when every third-world country reaches our level of consumption? Well, most likely more wars will break out in fighting over resources. What the world needs is more cooperation and population control to be able to maintain a life for all that is comfortable and relatively stable.

John Q Public says:December 17, 2009 at 6:02 pm

The IRS are blood sucking scum. If you think that we pay taxes to live in such a great country than you are stupid. Both because this is NOT such a great country, and because that money is to fund things that will NEVER help you or me, or anybody. Abolish the income tax. You are wasting our money you scumbags.

Rick B says:December 18, 2009 at 8:31 pm

It always amazes me how people can rail against income taxes. You CANNOT run a modern country without them. Try to get rational and think about what would happen without income taxes. For one thing, you would have to park your car and walk everywhere. There would be no roads that you could drive on. There are so many examples a logical thinking person could list. It's laughable that anyone in their right mind could imagine a modern society without income taxes to pay for all the things the citizens demand. How long do you think the US would remain a free country without a military? How do you think the military is funded? Or, what about education? We sure didn't get our money's worth with yours. You don't even know the difference between "than" and "then". You need to get real. If you don't like the country the way it is, run for office and make a case for your changes. It's sooooo easy to sit behind a computer and remain invisible spouting nonsense. We all know things are not perfect in American. Can you name one place where everything is perfect and you'd like to live? Would you be happier with a consumption tax or some other type of tax? Or, do you honestly think the US, or any state, can operate without any tax system? The states in the US without an income tax have other taxes to take its place. Lay out your case for no taxation. I'll be waiting for your intelligent response.

Andrew Kerai says:December 25, 2009 at 10:32 pm

Look, I am sick of all those undercover socialists out there who claim our tax dollars actually make America a better place to live. They DON'T! They are simply a means of the economically viable subsidizing those who contribute nothing to the country. Taxes have been an impediment to American progress, not a proponent of it. Luckily, private enterprise has been sufficient to more than compensate for this economic inefficiency and has made the US the greatest country in the world. However, we are trending to a point that this may no longer be the case, given increased global competition (which is a good thing) and the increasing need to be efficient. The Obama administration will likely raise taxes to a point that both hinders global markets and weakens America's relative economic advantage.

This trend actually began with FDR, with his New Deal plan. As a direct result of this program, the US created Social Security and then, through LBJs continued New Deal-like initiatives, the Medicare tax came into effect. These combined taxes total roughly 8% of gross income. The major cause behind this recession was that credit spreads widened drastically, making it too expensive for companies and individuals to borrow. Imagine is our private loanable funds increased by another 8% roughly (through the transfer of FICA taxes to private investment). Obviously, this wouldn't likely be the full 8% because some of this would be spent, but I think you get the idea. In essence, we would have had more private loanable funds which would have decreased yields and mitigated the effect of widening credit spreads. Another problem with a regressive tax system, those who are more likely to save and, thus, increase loanable funds (and, therefore, lower the deficit), the top-earners, are taxed the highest percent. No wonder why our deficit has reached unacceptable levels and continues to trend unfavorably! Bottom line: THE GOVERNMENT NEEDS TO SPEND LESS MONEY, CUT PROGRAMS, AND LET THE FREE MARKET WORK! LOWER TAXES AND CUT SPENDING! ITS F*CKING COMMON SENSE!!!

Rick B says:December 26, 2009 at 11:39 am

Obviously, you're someone caught up in a political mindset unable to look at things realistically or even humanely. First, the current recession and near collapse of our financial system was caused by a lack of regulation, lack of oversight, and pure greed. In other words, capitalism without parameters. Without parameters, capitalism turns totally Darwinian and it becomes survival of the fittest. There's absolutely no room for the brotherhood of mankind. This might be fine in professional sports, but when you're dealing with the lives of every day human beings, it becomes ruthless and uncaring. Is that your idea of a perfect world?

Apparently, you have no problem with the fact that your beloved private enterprise decided to bet the house on speculative investments and lost and then decided they could dump the problem on the average guy and walk away. Sadly, they succeeded spectacularly.

You also seem unaware that federal income taxes are at a historical low point. However, all those tax cuts during the Bush years did nothing to help the average guy working his/her 40 hour week because behind the scenes all those wizards in charge of the financial structure of America were busy creating a huge self-serving bubble that burst leaving the mess to be cleaned up using the average Joe's bank account.

You appear to think there's nothing more important in this world than money and material possessions. You hint at your opposition to Social Security and Medicare. Apparently, in your mind, anyone not rich is undeserving of having at least the basic necessities to sustain them in their old age.

We Americans seem to be having a rough time coming to terms with the fact that other countries are moving up and we no longer have total control of the world economy. We did for a long time and it spoiled us to a point where we are blind to reality. It's a different world today.

FRANCES N says:December 28, 2009 at 7:19 pm

Is the $250. sent to seniors taxable? And is the decreased withholding of those with paychecks merely a withholding decrease or a tax decrease?

phil pauley says:January 6, 2010 at 8:25 pm

Dear Doug,
Your math appears to be correct. Kevin's post on Nov 5 is incorrect & somewhat misleading.
There is obviously a need for clear explanations of the current IRS tax code!

steve says:January 7, 2010 at 12:06 pm

I just quickly did my 2009 taxes and I am going to owe more taxes this year than ever. I always had at least 10% held out on federal taxes plus extra.since the stimulus I am way short now , why didn't they tell us we would have to pay it back in 2010.I would have increased my federal taxes to compensate for it .would welcome reply

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